We’ve compiled a quick guide with all of the information black-owned businesses need to know about business loans and other types of business financing.
Best financing options for black-owned businesses
Whether you are seeking a loan, a grant, or another form of business funding, there are many options for black-owned businesses to take advantage of. These include:
- Grants.gov: As a government-run database, this website offers a comprehensive and searchable list of all grant opportunities available to business owners in the United States. Grants are often preferred to loans and credit cards since they do not have to be paid back and are designed to help small businesses succeed. Grants are offered through government agencies, non-profits, and companies.
- SBA: The Small Business Administration guarantees a variety of loan programs through its network of partner lenders. Loans include microloans, equipment loans, real estate loans, and general business loans. Business owners that have had trouble qualifying for loans through other sources may have better luck with an SBA loan, although the application process can take several weeks or months. The SBA Community Advantage program is a particularly great option for small businesses in underserved areas that may be struggling to obtain financing.
- Online business loans: Loans offered by online lenders are increasing in popularity for numerous reasons including their ease of use, flexibility, and competitive interest rates. Online business loans often get you access to your funds much quicker than applying for a loan via a traditional bank or the SBA.
- Credit union business loans: Likewise, loans through a local credit union often offer business owners greater flexibility in loan approval while giving them a great deal. Credit unions are membership-based and typically committed to assisting the local community. Check with a credit union near you to learn more about their membership requirements and available loan programs.
- Business credit cards: Alternatively, business owners can use credit instead of loans. Credit cards and lines of credit gives business owners access to a revolving source of funds as long as they pay the balance off in full. Credit cards can be an especially smart choice for emergencies, one-time purchases, and recurring costs - especially if you can find a deal on a card with a 0% introductory APR offer.
- Opportunity Fund: The Accion Opportunity Fund exists to support small business owners of any race, gender, or economic background in hopes of closing the access to financing gap. As a non-profit lender, the Accion Opportunity Fund offers flexible loan terms and competitive interest rates in loan amounts ranging from $5,000 to $100,000. In addition to financing, AOF assists small business owners with opportunities for networking, coaching, and other resources.
- Kiva: Kiva offers business owners a way to access loans via a community of investors that crowdfund small businesses. As a non-profit, the Kiva program gives entrepreneurs a way to obtain capital without having to go through a traditional bank or loan program. Kiva loans carry NO interest and are available in amounts of up to $15,000 to U.S. applicants 18 years or older.
- Minority Business Development Agency: As a part of the U.S. Department of Commerce, the MBDA focuses on connecting minority-owned businesses with capital, contracts and other resources. A MBDA Business Center near you can help your company secure access to capital.
Tips for applying for a small business loan
Applying for a business loan can seem a bit intimidating, but with the following tips below, applying for a business loan can be much quicker and easier than you may think:
- Check your credit: The higher your credit score, the lower the interest rate you can expect to receive. Some lenders may run your business credit if you have one, but the majority will check your personal credit. It’s very important to know your current credit score and verify the information on your credit report before applying. This allows you to check for any errors on your report and make moves to increase your credit score if needed (such as requesting credit limit increases).
- Have a business plan: Every small business owner should have a comprehensive written business plan. A typical business plan includes sections on operational strategy, marketing strategy, financial strategy, and more. Having a business plan not only sets your company up for success but also helps improve your chances of getting a business loan.
- Gather documentation beforehand: In addition to a business plan, lenders typically also request several other documents during the loan application process. In order to see loan approval as quickly as possible, business owners should be prepared to submit this information before starting the process. Be sure to gather documents about your business including any articles of incorporation, financial projections, tax records, and bank statements. Some lenders may have qualifications such as a minimum length of time in business (usually 1-2 years) and a minimum annual revenue that you will need to prove with this documentation. Having all your paperwork gathered ahead of time can save time during your loan approval.
- Get prequalified: It always pays to get prequalified. This process allows you to compare rates, fees and other loan terms by shopping around for the best deal.
Is it harder for black owned businesses to get loans?
With over two million black-owned businesses in the United States, there are plenty of opportunities regardless of ethnicity. Business owners of all ethnicities, cultures, and backgrounds are entitled to equal access and opportunities for loans and other types of financing in the United States. Loans are most commonly offered through community banks and credit unions, although they can also be found via the internet from alternative online lenders.
However, black-owned businesses may struggle to obtain loan approval due to discrimination and racial bias, although illegal in the world of lending. Certain non-profit organizations can help minority-owned businesses gain access to loans and other sources of funding. (See the section below)
Other helpful resources for black business owners
Black business owners and entrepreneurs can take advantage of the following resources and organizations designed to help minority-owned small businesses succeed:
- The National Black Chamber of Commerce: The National Black Chamber of Commerce is “dedicated to economically empowering and sustaining African American communities through entrepreneurship and capitalistic activity”.
- National Urban League: The National Urban League exists to enable "African Americans and other underserved urban residents to secure economic self-reliance, parity, power and civil rights."
- Coalition To Back Black Businesses: The Coalition will offer $5,000 business grants to applicants each fall through 2023, including mentorship and training.
- U.S. Black Chambers, Inc.: Likewise, the U.S. Black Chambers, Inc. (USBC) prides itself on being the “National Voice of Black Businesses” that supports a network of business organizations and black enterprises.
- Black Women Connect: Black Women Connect is a "collective of executive and senior-level Black women administrative leaders" who come together to support one another through business management success. Programs include mentorship, networking events, and educational resources.
- Digitalundivided: This non-profit organization supports companies owned by women of color through access to funding and other business opportunities.
- Minority Business Development Agency: The MBDA is a part of the U.S. Department of Commerce and focuses on connecting minority-owned businesses with capital, contracts and other assistance. Business owners can visit MBDA Business Centers in various locations to get access to information and resources.
- National Minority Supplier Development Council: From the creation of a new business fund designed to assist minority-owned enterprises to a certification program for minority business executives, the NMSDC offers a variety of financial, educational, and networking opportunities for black entrepreneurs.
- Small Business Administration: The SBA Learning Center offers a variety of free training courses for all business owners to take advantage of online. In addition, the 8(a) Business Development program further helps minority-owned businesses by boosting access to certain contracts.
- SCORE: SCORE is designed to help small businesses of all kinds succeed through a variety of helpful resources including webinars, workshops, mentorship programs, and educational blogs.
While unfortunate to say, black-owned businesses have a track record of receiving less funding and at higher rates. As we strive to beat diversity, we need more black business owners to fight for what’s right. The truth is that applying online for a business loan may help avoid any discrimination. At PrimeRates you can confidently apply for a business loan from a network of top national lenders that will do everything they can to support your dream.
Apply & compare rates with PrimeRates
As a black business owner, you’ve worked hard to get to where you are; and you deserve success just as much as anyone else. A business loan can help you achieve success, but it can also be costly. When shopping for a business loan, it’s important to compare options.
At PrimeRates you can receive personalized business loan offers that you actually qualify for in a matter of minutes. Your credit score will not be impacted by checking offers, unless you decide to accept an offer. Once you’ve found the business loan that meets all your needs and budget, you can finalize the loan with the lender and receive funds quickly.
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